Spread

In everyday trading talk, "spread" most often means the gap between the bid price (what buyers are willing to pay) and the ask price (what sellers want) for a stock, option, or other instrument at a given moment. If a stock's bid is $10.00 and its ask is $10.05, the spread is $0.05. This gap exists because market makers and liquidity providers earn a small profit for standing ready to buy and sell instantly, and it effectively acts as a hidden cost of trading: buy at the ask, sell at the bid, and that difference is gone from your return before the price even moves.

The word also has a second, more specific meaning in options trading, which is what the original definition here was pointing at. An options spread is a strategy where a trader simultaneously buys one option and sells another on the same underlying stock, with the two legs differing by strike price, expiration date, or both. Combining a long and short option this way changes the risk profile compared to holding either option alone — often capping both potential profit and potential loss in exchange for reducing the upfront cost or narrowing the range of outcomes.

The nuance that trips people up is that these two meanings are related but not interchangeable, and both are commonly just called "spread" with no qualifier, so context matters. When someone says "watch the spread" while discussing entering a trade, they almost always mean the bid-ask spread. When someone says "I put on a spread" while discussing options strategy, they mean the multi-leg position. A wide bid-ask spread on an option contract can also make an options spread strategy more expensive to enter and exit, so the two concepts frequently interact in practice.

For stocks, ETFs, and other simple instruments, spread almost always refers to bid-ask spread. For options and futures, it can mean either, and traders learn to tell from context which one is being discussed.